__OVERVIEW OF SCOPE 2 CALCULATION METHODS__

For the “Location-based” method, the calculation is done by taking the total amount of power purchased from the grid and multiplying that by the regional eGrid factor. The equation is (Total Purchased kWh) * (eGrid factor) = GHG. This is the same Scope 2 calculation methodology from previous years, for anyone using the default emissions factor (as opposed to a custom factor). The difference is that for the location-based method, you do NOT subtract emissions from purchased RECs and report reduced “Net Emissions.” RECs and other grid-metered renewable energy purchases are not factored in.

The “Market-based” method does take your REC purchases or other grid-tied renewable energy purchases into account, but it factors RECs into your Scope 2 calculation directly (rather than asking you to subtract RECs from your Gross Emissions to get a Net Emissions total after you’ve done all three Scope calculations.) This calculation works by adding or subtracting renewable energy purchases (including RECs) directly from your utility consumption figure, and *then* multiplying the remaining consumption number by a “residual” emissions factor. (Residual emissions factors are factors that exclude generation from any voluntary renewable energy transactions; since those renewables are being subtracted from users’ utility consumption data, it is important not to “double-count those avoided emissions.) Thus, the equation for Market-based emissions calculations is (Total Purchased kWh – Renewable kWh) * (Residual Factor) = GHG.

__NOTICE OF IMPORTANT SCOPE 2 CALCULATION UPDATE__

Until recently, the GHG Protocol Guidance was to use the same eGrid factors needed for the Location-Based Method as the Residual factors needed for the Market-based method, because better data was not available. However, Green-E now offers more accurate Residual factors for US and Canada for years 2015 and later—which we just incorporated into SIMAP in April 2018. Residual factors come from the same data source (EPA’s eGrid program) as the default eGrid factors, but the two calculations differ as follows:

eGrid EF = (Total CO2 emissions) / (Total MWh)

Residuals EF = (Total CO2 emissions – CO2 from renewables) / (Total MWh – MWh from RECs transactions)

The way that Residual Factors are calculated can result in dramatic annual changes. Those are due to the following:

- Residual EF calculations are done at the level of NERC region. NERC regions are fewer and more aggregated regions than the ones used to provide the default eGrid factors. The aggregation of the regions for residual EFs means that the fuel mix for your region will be different than that of your eGrid mix, because it covers a wider area. This could result in your residual EF being either larger or smaller than your eGrid EF, depending on how your eGrid region’s fuel mix compares to your residual EF (NERC) region.
- The residual EFs change from year to year due to both changes in fuel mix AND market changes for renewables (more or less renewable energy sales). Because the renewable market is still very dynamic and growing and changing rapidly, the impact on regional emissions factors can also be dramatic.

In sum, you may see significant shifts and variability in your Market-based Scope 2 totals for the years 2015 onward; this is a reflection of the changing grid and energy markets (and is not an error.)